A helping hand for investment education

Companies step up efforts to help employees build retirement savings

Where can employees turn for information to help them make better choices about investing and preparing for retirement?

Increasingly, the answer is their employer.

Many Iowa workers whose 401(k) or other retirement plans are sponsored by their employers also look to their employers for help in becoming smarter investors. Fortunately, a new collaboration between the Iowa Insurance Division and a national nonprofit aims to help more employers in the state to educate their workers about preparing for retirement.

The “Investment Education in the Workplace” program, part of a nationwide initiative by the nonprofit Investor Protection Trust, is being made available to Iowa employers statewide following a successful two-year pilot of the program.

In a related effort to reach employees with little or no access to retirement savings plans, the insurance division is also tailoring an education program for workers in the health care industry.

Big disconnect

Surveys indicate that upwards of 90 percent of Americans say they need and want to know more about money, but fewer than 5 percent have had even 10 hours of formal financial education, said Joe Saari, founder and CEO of Precision Information LLC. “So there’s a big disconnect,” he said.

The San Diego-based financial education company, working with the insurance division and the Investor Protection Trust, has been the contract provider in Iowa for the online program, which consists of a series of 10 one-hour financial education modules.

The program “makes a lot of sense,” said Craig Goettsch, the insurance division’s director of education. It’s important to provide a non-commercial investor education resource for employees, he said. “We’re not pushing products; we’re explaining process, so that when they’re talking to a financial planner or even a broker, they can ask the right questions,” he said.

In Iowa, the Investment Education in the Workplace program has been offered three times in the past two years; 33 Iowa employers and more than 1,400 workers have taken the courses so far. Businesses that have participated have included credit unions, assisted living facilities, manufacturers, retailers and county governments. The program is funded by civil penalties assessed to Iowa securities firms, along with grants from the Investor Protection Trust Foundation.

An add-on program in Iowa has provided information to employees about Social Security claiming strategies that teach them that they can collect far larger monthly benefits by waiting until they’re at full retirement age – now 67 – rather than beginning to collect at the minimum age of 62.

Iowa employees who participated in the pilot of that program on average found they could collect an additional $171,000 in estimated Social Security benefits by optimizing their claiming strategy, said Bill Meyer, founder and managing principal of Social Security Solutions Inc., the firm that provides the program.

“What we’ve seen is very similar in results (to the original workplace education program),” Saari said. “They’re improving their knowledge and changing their behavior. And they’re incredibly grateful for the experience.” To measure improvement from the courses, employees completed evaluations prior to beginning the program and again after completing the courses.

Changing behavior

Iowa was an early participant in the program, which is now being rolled out nationwide, said Don Blandin, president and CEO of Investor Protection Trust, who traveled to Des Moines last month for a national conference on investor education hosted by his organization. Investor Protection Trust initially worked with Wisconsin, Pennsylvania and North Carolina regulators to assist with development costs and to test the program.

“We’re trying to get everyone to work together so we can get the best cost,” he said. “So we’ve been able to drive the cost down significantly. (Companies pay) $33 per person for 10 hours of investor education, which to me is an affordable price.”

Blandin said businesses have been quick to recognize the value of offering the program, after seeing that it’s effective in changing behavior and can improve productivity.

“We’re not just offering education; we’re finding out if it’s changing behavior,” he said.

Each participating company must designate one “champion” who will commit to spending at least one hour a week to encourage and follow up with participants over a 15-week period. The online course provides automated email reminders throughout the week to remind employees to try to complete one course weekly; they might be given an incentive such as a potluck dinner for completing all 10.

“About 70 percent of people who complete one course complete all 10,” Saari said. “By comparison, most employers are lucky to get their employees to spend one hour a year in a lunch-and-learn workshop. Even those who don’t complete all the courses might complete five or six, which is a lot more than most employees get,” he said. Because the program is grant-funded, it’s offered to companies on a first-come, first-served basis.

“We also encourage them to offer employees the opportunity to take the course on the job,” Saari said. About two-thirds have taken the courses during work hours, he said, while other employees prefer to take the courses at home on their own computer or smartphone.

Among the Iowa companies that have tried the program is ACT Inc., the college testing company in Iowa City, which offered it as part of its corporate wellness program.

Of 226 employees who signed up to take the courses, 59 actually completed all 10 and took the final quiz, said Chrissy Swartzendruber, a human resources representative who served as the employer champion for the program. “We had great feedback,” she said. “The people who participated thought it was well worth their time.”

Swartzendruber, however, admitted that she was among the majority of employees who didn’t complete the courses. “I was very excited about it, but time commitments on other projects kept me from completing it,” she said.

Starting next year, the program will be offered three times a year in Iowa on a first-come, first-served basis for businesses to offer to their employees, Saari said.

Iowa employers that would like to learn more about how they could benefit from grant-funded financial education for their employees, or would like to try a sample of the coursework themselves, should email info@educatedinvestor.com and include “Des Moines Business Record” in the email title.

Pendulum swinging back to workplace investor assistance

Workplace-based financial education programs are regaining popularity with employers, said Knight Kiplinger, editor-in-chief of The Kiplinger Letter and Kiplinger’s Personal Finance magazine. Kiplinger was among several financial experts who spoke during a national Investor Protection Trust forum held last month in Des Moines.

Kiplinger said employers became wary several years ago of offering financial education programs, because they were afraid it would be misconstrued as investment advice and they could be sued by employees who took a loss in the market. However, “the pendulum is swinging back,” he said during a panel discussion with other retirement savings experts. “The safe harbor for employers is using third-party organizations like a 401(k) administrator,” he said.

Recent trends toward life cycle and target date funds have been helpful in reducing the problem of an overwhelming number of investment choices, Kiplinger said. “Frankly, the bigger problem with 401(k) assets, especially with younger workers, are overly conservative portfolios in money market and bond funds,” he said.

Providing one-on-one assistance to employees is a vital part of helping them to prepare for retirement, said Paul Schulte, director of financial strategies with Bearence Management Group in West Des Moines. The investment advisory firm works with plans ranging from two to 1,500 employees.

Regardless of their plan size, employers generally have access to robust websites developed by the retirement plan administrator, but in many cases the administrators push all the services to the website, “so there’s no one to talk to,” Schulte said.

His firm makes a point of offering quarterly one-on-one account reviews for employees of plans it administers. Unfortunately, Schulte noted, only 25 to 50 percent of employees typically will take advantage of the offer.

“We’ll help give recommendations and counsel people on volatility,” he said. “If I do a good job helping that person, I might get hired to help them with other services where they need assistance. I’ll have people tell me, “I’m getting more help and advice from you on this $10,000 account than my husband is on a half-million-dollar account.”